California's consumers may see rebate from energy crisis

$1.6 billion in refunds from energy wholesalers that profited from the state's energy crisis more than a dozen years ago, if an administrative law judge's recommendation holds up under review, regulators said Tuesday.

The California Public Utilities Commission praised the judge's interim ruling as a victory for a state that saw energy prices spike to unprecedented heights amid rolling blackouts in the summer of 2000. The state itself bought billions of dollars' worth of electricity to keep the lights on.

The judge sided with the state in finding that more than a dozen electricity wholesalers artificially drove up energy prices.

"There was massive manipulation going on in the market by virtually all these sellers," said Frank Lindh, the commission's general counsel. "This is fabulous news for California. It's really a vindication for us."

The commission calculated the potential rebates from a formula adopted by the judge in a decision issued Friday. The recommendation now goes before the Federal Energy Regulatory Commission.

If commissioners agree, the decision then must survive a likely court challenge by the wholesalers.

One of those is the Bonneville Power Administration, based in Portland, Ore. Spokesman Michael Hansen said the utility is "disappointed" with the recommendation but would have no more comment until it reviews the decision.

Other electricity wholesalers found liable in the judge's ruling could not immediately be reached.

Pacific Gas & Electric Co. and Southern California Edison, both of which had to buy power at inflated prices during the energy crisis, also could not immediately comment. Edison spokeswoman Lauren Bartlett said the company was still reviewing the 72-page decision by Presiding Administrative Law Judge Philip Baten.

The case dates to August 2000, when San Diego Gas & Electric Co. filed a complaint with the Federal Energy Regulatory Commission seeking a cap on escalating wholesale energy prices. That began what the judge described as a "long arduous journey" through the regulatory and judicial systems.

The commission initially rejected California's bid for damages from what the state claimed was an organized effort to artificially inflate electricity prices under California's newly deregulated energy market.

The state sued and won a reversal from the 9th U.S. Circuit Court of Appeals in 2006. Baten issued his recommendation after a trial last year that produced more than 10,000 pages of transcripts and nearly 1,000 exhibits.

"The tortuous factual background of the California energy crisis that underpins this proceeding is lengthy and complex," Baten noted in issuing his ruling.

He found that wholesalers artificially exported electricity from California and then sold it back into the state at inflated prices.

Based on Baten's formula for assessing damages, the providers would owe $1 billion in rebates plus another $600 million in interest, said Lindh, of the PUC.

"It has to be voted on by the full five-member commission, but it carries a lot of weight," Lindh said. "The losers can always file an appeal. The appeal process on a $1 billion case could drag out for a long time."

If the damages eventually are paid, the Public Utilities Commission said the money would be refunded to consumers as an offset against their current electric bills.